The Finance Brokers Association of Australia (FBAA) has registered a ‘no surprise’ response to an ACCC finding that banks are using their oligopolistic power and pricing structures to squeeze even more profit out of borrowers.
The ACCC’s Residential Mortgage Price Inquiry report has found that opaque, discretionary pricing by banks makes it difficult and time consuming for borrowers to shop around and stifles price competition.
FBAA managing director Peter White said the report highlighted the fact it is against their interests for banks to make pricing transparent, and that’s where brokers provide the solution.
“Brokers are the key to the need for greater transparency and we are able to help borrowers negotiate with their bankers.”
Further evidence of the key role of finance brokers also came in the ACCC report which concluded that high search costs and the effort required by borrowers reduces their willingness to shop around.
“Every month that passes when a borrower has a bad deal means more profit for the bank and less money for the borrower.
Mr White also pointed out that mortgages are not only about interest rates.
“Often borrowers get trapped in a loan that doesn’t suit their needs, but brokers have access to hundreds of different loan products and take into account individual circumstances.”
The ACCC monitored the prices charged by the five banks affected by the government’s Major Bank Levy between May 9 2017 and June 30 2018. The big four banks gained an estimated $1.1 billion in additional revenue because they took the opportunity to increase headline variable interest rates for interest-only mortgages.
“This predatory move by banks cost the average owner-occupier interest-only standard variable mortgage lender $1300 in interest in the first year,” Mr White explained.
“The ACCC stated that often it’s only a threat to leave which will force banks to give borrowers a better deal but that’s not good enough.
“The royal commission has already shown that banks have a greedy, profit first culture so why reward them by staying?”